You Could Soon be Paying Checkout Fees for Credit Card Use

Back in August, we reported that "you could soon be faced with a stark choice: pay a lower price or use your credit cards" in many bricks-and-mortar and online stores. At the end of January 2013, that prediction is set to become a reality for many as a result of a settlement reached between merchants, and a number of major banks and payment networks.

What's changed

Up until now, merchants have been banned from charging extra for processing credit card transactions, even though these typically cost them in "swipe" fees anything between 1.5 and 3% of the value of a sale. That money is collected by payment networks (American Express, Discover, MasterCard and Visa), which keep a bit of it, but remit most on to credit card companies.

The settlement, signed on Nov. 9, frees merchants to pass on that cost -- though only precisely that cost -- at the checkout to a consumer paying with a credit card or a charge card, but not a debit card.

This is set to apply in 40 states. The 10 that have existing laws banning the practice are:

According to a useful fact sheet, recently published by Consumer Action, those retailers that choose to levy the new fee must comply with "clear disclosure" requirements. Presumably, this is most likely to take the form of prominent signs at both the entrance to the store and points of sale. Online retailers should make a fee-charging policy clear on their websites' home pages. Customer receipts must itemize checkout fees, showing their exact value.

Different retailers may pay -- and different credit cards may attract -- different swipe-fee rates, which makes the whole process more complicated. Don't be embarrassed to ask at the checkout how much will be charged for using the various cards in your wallet. You may well find the amount is higher for rewards credit cards, and you'd be better off paying with another piece of plastic.

How to minimize your checkout-fee costs

Many retailers may soon have a right to charge checkout fees, but they aren't obliged to exercise it. Indeed, many may choose to leave things as they are because they're scared they could lose trade if their competitors decide not to pass on swipe costs. You can encourage that fear by shopping around and buying from stores that haven't introduced the levy.

Consumer Action also suggests asking for a discount on the ticket price, especially if you believe the fee has been built into the cost of the item. Many merchants, unsure how the new system is going to pan out, may well be susceptible to such requests.

Indeed, if enough customers vote with their feet, checkout fees could yet prove to be a flash in the pan.